Former FTE Networks CEO Michael Palleschi was sentenced to 12 years in prison for orchestrating a scheme that involved inflating company revenue, hiding liabilities and expenses, and embezzling funds. The sentencing was handed down by U.S. District Judge Colleen McMahon in Manhattan federal court.
According to the U.S. Attorney for the Southern District of New York, Jay Clayton, Palleschi’s actions led to significant financial misstatements at FTE Networks, Inc., a telecommunications company formerly based in Naples, Florida, and Manhattan. “FTE’s financial statements were fraudulent, harming FTE’s investors and undermining confidence in our markets,” said Clayton. “Our Office is committed to personal accountability in white-collar crime and Michael Palleschi’s sentence reflects that commitment.”
Court documents state that from 2014 to 2019, Palleschi served as chairman of the board and chief executive officer at FTE. Between 2016 and early 2019, he and others issued about 70 convertible notes totaling over $22 million in principal value to private lenders but failed to properly account for related liabilities on the company’s financial statements. To conceal this activity, they provided fake documents to accountants and auditors and forged signatures on board resolutions.
Palleschi also oversaw false recognition of more than $13 million in revenue for services that had not been performed or were unsupported by documentation. Auditors who questioned certain receivables were shown fabricated emails as proof of payment commitments from customers. These actions resulted in significant overstatement of accounts receivable figures across multiple quarters.
The former CEO further misused corporate resources for personal benefit through unauthorized stock issuances and personal use of the company’s private jet.
At sentencing, Judge McMahon remarked, “this was a fraudulently run operation from the beginning.”
In addition to his prison sentence, Palleschi received three years of supervised release and must pay restitution exceeding $13.5 million along with forfeiture penalties totaling more than $546,000.
U.S. Attorney Clayton commended the Federal Bureau of Investigation’s efforts in investigating the case and acknowledged assistance from the Securities & Exchange Commission.
The prosecution was handled by Assistant U.S. Attorneys Peter Davis and James McMahon from the Securities and Commodities Fraud Task Force.
